The New Jersey Department Of Labor’s Aggressive Enforcement Of Prevailing Wage Violations 

This year the State of New Jersey introduced a number of new employment laws focused on cracking down on prevailing wage violations and independent contractor misclassification claims, which includes a new law imposing joint and personal liability on owners, directors, officers, and managers who violate New Jersey’s wage and hour laws. 

The most notable addition to the New Jersey Department of Labor and Workforce Development’s (”NJDOL”) enforcement arsenal is that its Commissioner now has the ability to issue a stop-work order at any site where it concludes a violation of New Jersey’s wage and hour laws has occurred. Specifically, according to A5838 (P.L. 2019, c. 372), which became effective in January,  if the  Commissioner concludes that an employer violated any state wage, benefit, or tax law, the Commissioner may issue stop-work orders, which suspend the employer’s operations. The Commissioner must serve notification of its intent to issue a stop-work order at least seven days prior to its issuance, and impacted contractors may file an appeal to the Commissioner within 72 hours of receipt of the notification. Within seven business days of receipt of a notice of appeal, the Commissioner must hold a hearing on the contested stop-work order and a written decision must follow within five business days. If an employer conducts business in violation of the stop-work order, the Commissioner may assess civil penalties of up to $5,000 per day of violation. 

Obviously, this is a powerful enforcement tool and we have learned that the NJDOL has already started issuing stop-work orders. The power to shut down a contractor’s job site with only seven days’ notice is a tool that can be devastating to any contractor trying to complete a public project during the height of the busy construction season. Accordingly, contractors should be mindful of New Jersey’s wage and hour laws and should immediately contact their legal counsel for guidance in the event they are served with a stop-work order by the Commissioner. 

The NJDOL Has New Enforcement Tools To Punish Contractors For Employee Wage Misclassification Offenses

The NJDOL also has new tools that it will use this year to ensure that contractors are properly classifying their employees as required by New Jersey law.  Pursuant to A5843 (P.L. 2019, c. 375,  employers must conspicuously post notifications for their employees: 1) explaining New Jersey’s prohibition against employers misclassifying employees; 2) the benefits and protections to which an employee is entitled under state wage, benefit and tax laws; and 3) the available remedies for suspected violations. According to A5839 (P.L. 2019, c. 373), the Commissioner of New Jersey’s Labor and Workforce Development (“Commissioner” or “LWD”) may assess an administrative misclassification penalty against employers in the amount of $250 per misclassified worker for first time violations and $1,000 per misclassified worker for subsequent violations. 

The Commissioner may also assess a penalty providing for a misclassified worker to receive up to 5 percent of the worker’s gross earnings over the past 12 months. It is in the Commissioner’s discretion to determine if the penalty should be paid directly to the worker or if the penalty should be paid to the Commissioner to be held in trust for the worker. Additionally, the Commissioner now has the power to post the name of any person or entity (including, but not limited to, a company corporate officer or principal, corporations, contractors, and subcontractors) found to be in violation of any state wage, benefit, or tax law on the internet for public inspection.  

New Jersey also expanded the reach of its wage and hour enforcement in January by enacting A5840 (P.L. 2019, c. 374). While the Wage Theft Act already provides that employers and staffing agencies shall be jointly and severally liable for violations of New Jersey wage laws. This new law expands such joint and several liability to violations of New Jersey tax laws. Now, the law explicitly imposes liability on owners, directors, officers, and managers who violate New Jersey wage or tax laws on behalf of an employer or a staffing agency.

These changes are designed to take aim at companies that routinely misclassify workers as independent contractors when they really are employees.  Since 2015, when the New Jersey Supreme Court decided Hargrove v. Sleepy’s LLC, all employers in New Jersey have been required to use the “ABC” test to determine whether a worker is an employee or an independent contractor for purposes of resolving  wage payment or wage and hour related issues.  Pursuant to the ABC test, an employer is required to presume that a worker is an employee unless the employer can show that:   (A)   the employer neither exercised control over the worker nor had the ability to exercise control in terms of the completion of the work;   (B) the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise; and   (C) the individual is customarily engaged in an independently-established trade, occupation, profession or business. All contractors should periodically examine their worker classifications to ensure they satisfy the “ABC” test.  

Recently there has been a movement by certain states (like California) to classify workers for well-known ridesharing companies as employees, rather than independent contractors. As a result, some states have modified the ABC test so that the “B” portion of the test reads a little differently than the test currently recognized by New Jersey. Typically, states will remove the words after the “or” in the “B” section of the ABC test. For example, the “B” section typically requires employers to demonstrate that “the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise.”  Most ridesharing companies say that their workers are independent contractors because their workers perform their duties using their own cars and do not report to any place of business owned by the employer.  That allows them to satisfy the “B” prong of the ABC test because their workers are performing their services outside of the physical buildings owned by the employer. By removing the language after the “or” in section “B” of the  ABC test, states are able to argue that drivers for popular ridesharing companies are employees because the duties they perform are not outside the ridesharing companies usual course of business. 

This year New Jersey’s legislature proposed new laws similar to the one implemented in California. However, New Jersey’s legislature refused to approve the proposed law.  While it is unclear if New Jersey is going to follow the lead of California and pass a similar law changing the ABC test, there is clearly some support for the change. As a result, contractors should keep an eye out for any new legislation that is passed concerning independent contractor designations over the next year.  

New Jersey’s Apprenticeship Law Is Now Active And May Force Smaller Contractors To Unionize

Last year New Jersey passed P.L.2019, c.21., which requires public contractors to certify that they have an apprenticeship program for each trade they use on a public project. Although this law was passed last year, it is relevant now because the law had a built-in transition period and only became fully enforceable on May 1, 2020. Notably, contractors cannot rely on internal training programs and tool box talks to satisfy this training requirement since the term “apprenticeship program” is defined as one that is approved by the United States Department of Labor and provides the trainee with combined classroom and on-the-job training. The expected result is that smaller contractors will be harmed since it is difficult to set up and manage an apprenticeship program, and some business will need to set up multiple programs to cover all of their trades. As a result, the law heavily favors large unionized contractors who can satisfy the requirements of P.L.2019, c.21 through their use of union employees, since the unions already have federally approved apprenticeship programs.   

Currently even contractors with just one person must be part of registered apprenticeship programs for each trade that person utilizes while working. This could be a huge financial problem for a one or two man company that performs work covered by a variety of trades. Such a company would need to either have multiple apprenticeship programs for all of their trades. Small non-union shops will likely suffer the most because they will not be allowed to renew their registration and bid on upcoming projects in New Jersey until they are participating in a certified apprenticeship program. 

At this point contractors must determine whether they are going to provide their own apprenticeship programs, join a union, or join an organization that offers federally approved apprenticeship programs. An unintended consequence of the law is that certain contractors will be pressured into joining a federally approved apprenticeship program. Nonetheless, I expect a number of trade unions to use this new requirement as a means to expand the number of union shops in New Jersey since membership would bring delinquent contractors back into compliance and make them eligible to bid on upcoming government projects.

If you have any questions about the topics raised herein or about any other labor relations matter, please do not hesitate to contact the attorneys at Tobia & Lovelace Esqs., LLC at 973-746-6000 for further information.